
	Net Revenues and Accounts Receivable

Net revenues in the Home Health and Hospice segments were derived from all major payer classes and were as follows (in millions):



	Third Quarter						First Nine Months
	2013		2012		Percentage Variance		2013		2012		Percentage Variance
Medicare:
Home Health	$	191.8	$	185.0	3.7	%	$	577.7	$	561.7	2.8	%
Hospice	163.8		177.4		(7.7	)%	498.8		539.0		(7.5	)%
Total Medicare	355.6		362.4		(1.9	)%	1,076.5		1,100.7		(2.2	)%
Medicaid and Local Government	17.4		19.1		(9.0	)%	54.4		56.9		(4.4	)%
Commercial Insurance and Other:
Paid at episodic rates	15.1		21.4		(29.6	)%	43.3		62.8		(30.9	)%
Other	22.4		21.5		4.5	%	66.3		67.4		(1.6	)%
Total Commercial Insurance and Other	37.5		42.9		(12.5	)%	109.7		130.2		(15.8	)%
Total net revenues	$	410.5	$	424.4	(3.3	)%	$	1,240.5	$	1,287.8	(3.7	)%

Hospice Medicare Cap

For the third quarter and first nine months of 2013, the Company recorded net hospice Medicare cap credits of $2.9 million and $4.5 million, respectively, as compared to Medicare cap expense of $3.0 million and $6.2 million for the third quarter and first nine months of 2012, which is reflected in net revenues in the Company’s consolidated statements of comprehensive income. For the Medicare cap year 2013, which began November 1, 2012, the Company has recorded $1.4 million in Medicare cap expense and has five hospice providers currently estimated to be in excess of Medicare cap limits.

The Medicare payment cap, which is calculated for each provider by the Medicare fiscal intermediary at the end of the hospice cap period, is determined under the proportional method. The proportional method allocates each beneficiary's Medicare payment cap based on the ratio of the number of days the beneficiary received hospice services from the Company over the total number of days the beneficiary received hospice services from all providers. The Medicare payment cap amount is then further allocated between the hospice cap periods based on the ratio of the number of days the Company provided hospices services during each cap period. The sum of each beneficiary's Medicare cap payment, as determined above, represents the aggregate Medicare payment cap. Medicare revenue paid to a provider during the hospice cap period cannot exceed the aggregate Medicare payment cap. As of September 30, 2013 and December 31, 2012, the Company had Medicare cap liabilities of $5.9 million and $15.9 million, respectively, which was reflected in Medicare liabilities in the Company’s consolidated balance sheets.

Odyssey HealthCare, Inc. ("Odyssey"), prior to its acquisition by Gentiva, filed appeals with Centers for Medicare & Medicaid Services ("CMS") to change the methodology previously used to calculate the Medicare payment cap in order to utilize the proportional method of determining the payment cap, as described above. In connection with those appeals, the Company has received final settlement letters for many of its providers and recorded approximately $3.4 million and $5.9 million as net revenue for the third quarter and first nine months of 2013, respectively, in the Company's consolidated statements of comprehensive income.

Corporate Integrity Agreement

Under Odyssey's five-year Corporate Integrity Agreement ("CIA") with the Office of Inspector General of the United States Department of Health and Human Services ("OIG"), which became effective on February 15, 2012, Odyssey must engage a third party to perform verification and unallowable cost reviews. In addition, Odyssey's eligibility review team must review the eligibility of Odyssey's Medicare beneficiaries for the hospice services those beneficiaries received and prepare an eligibility review report. Odyssey must submit to the OIG annually a report with respect to the status of, and findings regarding, Odyssey's compliance activities. If Odyssey fails to comply with the terms of the CIA, it will be subject to penalties. In connection with these eligibility reviews, for the third quarter and first nine months of 2013, the Company recorded a negative adjustment of approximately $3.5 million and $5.0 million, respectively, which is reflected in net revenues in the Company’s consolidated statements of comprehensive income.

PRRB Appeal

During the third quarter of 2013, the Company finalized its year 2000 cost reports, which are now being settled by CMS. In connection with the settlements, the Company has recorded a positive adjustment of approximately $4.0 million to net revenues for the third quarter and first nine months of 2013, in the Company's consolidated statements of comprehensive income. See Note 14 for additional information.

Accounts Receivable

Accounts receivable attributable to major payer sources of reimbursement were as follows (in thousands):



	September 30, 2013			December 31, 2012
Medicare	$	188,556		$	192,541
Medicaid and Local Government	29,946			31,259
Commercial Insurance and Other	32,962			36,057
Gross accounts receivable	251,464			259,857
Less: Allowance for doubtful accounts	(9,006		)	(8,777		)
Net accounts receivable	$	242,458		$	251,080

As of September 30, 2013 and December 31, 2012, the Commercial Insurance and Other payer group included self-pay accounts receivable relating to patient co-payments of $1.9 million and $1.7 million, respectively.